A pump at a Petro-Canada gas station in Toronto, on June 23.Mark Blinch/Reuters
“Kids, you tried your best and you failed miserably. The lesson is: never try.”
– Homer Simpson
They are writing the obituaries already for the carbon tax. With the federal NDP signalling it may drop its support for the policy, and their provincial cousins in B.C. announcing they will scrap the province’s version of the tax if the feds scrap theirs, pricing greenhouse gas emissions has few friends these days.
The Conservative position, as near as anyone can make it out – that climate change should be fought, if at all, not by harnessing the power of the free market, but by central planning, a mix of command-and-control regulation and government subsidy – would appear instead to have won the day.
Fair enough, I suppose. That’s politics. It’s the tone of the obituaries I object to. The gist of most of the pieces I read was not sadness that the country should be about to toss aside a vastly superior policy for a vastly inferior policy, or anger at the blatant dishonesty of the campaign against it, but smirking cynicism at the very idea of anyone even attempting such a difficult political feat.
Silly Liberals. Couldn’t they have known that pricing carbon was a political loser? Sure, it might be the – pause for sneer – blackboard solution, the kind that out-of-touch eggheads and Laurentian elites favour, but out here in the real world folks don’t set much stock in blackboards.
It’s a version of what the journalism critic Jay Rosen calls the “church of the savvy.” More a pose than a stance, it disdains any attempt to score politicians on the merits of their differing proposals for fixing the problems facing society, but strictly according to how well they play the game.
Thus the Liberals are marked down for proposing a policy that, however superior as policy, was hard to explain to the public, while the Conservatives are congratulated, explicitly or otherwise, for shamelessly exploiting popular confusion around the tax.
How else to explain how Pierre Poilievre’s recent remarks that the tax, when fully implemented, would lead to a “nuclear winter” of “mass hunger and malnutrition,” a dystopian nightmare in which seniors are forced to turn their thermostats down to 13 C and people are left unable “to leave their homes or drive anywhere,” could have been reported straight-up, and not as lunatic hyperbole, wholly unworthy of a supposed prime-minister-in-waiting.
A quick refresher course in why the carbon tax is superior to the alternatives. Regulation only encourages people to do the minimum required to conform with the regulations. Subsidy often rewards them for doing things they were going to do anyway. Both only apply to the things that occur to the planners to regulate or subsidize.
Prices, by contrast, are a permanent, omnipresent incentive for businesses and households to reduce their emissions, by whatever means they find least costly – and to go on reducing their emissions for as long as the cost of doing so is less than the price.
How much more efficient is pricing carbon to the alternatives? Some years ago the Ecofiscal Commission, a group of environmental economists, estimated the economic costs of a carbon tax, sufficient to meet Canada’s internationally agreed emissions-reductions targets, at 0.05 per cent of GDP annually.
The costs of the regulation-first approach, by contrast, it put at up to 0.80 per cent of GDP: 16 times as much. At a time when growth is expected to average just 1.6 per cent, it’s huge.
Moreover, while the costs of the federal carbon tax, now in effect in eight provinces, are offset – more than offset, for 80 per cent of households – by federal rebates, no such rebates apply to the much greater costs of subsidies and regulations, though these are just as surely passed on to households.
So not only is the carbon tax more efficient than alternatives, but it is also more fair. Indeed, if we are so foolish as to scrap it, having already gone to the trouble and expense of implementing it, most households will be made worse off, since they lose more by eliminating the rebate than they gain from eliminating the tax.
At this the savvy political observer smiles indulgently. Yes, but you see, the very thing that makes the tax so efficient – that it exposes consumers to the costs of emitting greenhouse gases into the atmosphere, costs that would otherwise be ignored (in the do-nothing option) or buried in the prices of things (under the regulatory option) – is also what makes it politically toxic.
People don’t like to have costs rubbed in their faces. Come to that, they don’t like to have facts rubbed in their faces. At the back of their minds, most know they’ll end up paying the costs either way. They’d just prefer not to have that made explicit. They’d rather be lied to. And the smart politician will give them what they want.
I don’t know whether the carbon tax was politically unsaleable or not. I do know the Liberals made a miserable job of it, first trying to off-load it on the provinces, then when that failed, phasing it in too gradually, thinking that consumers would not notice the tax but in fact ensuring that they did not notice the rebates.
Worse, while the tax was touted as a replacement for costlier subsidies and rebates, it was in fact layered on top of all of the existing programs, with more added after. All told, the carbon tax now accounts for just a third of total current and projected emissions reductions. If Liberals don’t believe in carbon pricing, the voter could be forgiven for thinking, why should I?
And of course, the pièce de résistance: last year’s carve-out for home heating oil, a brazen bit of pandering brought in for no purpose but to save Liberal seats in Atlantic Canada. It did so, however, at the cost of seeming to endorse the most often heard, and most dishonest, criticism of the tax: that it imposes an unbearable burden on low-income households, a position which can only be maintained by deliberately ignoring the rebates.
Would a better, smarter, more consistent approach to the tax have succeeded where the Liberals failed? Again, I don’t know. What I do know is the cost of caving to this kind of appalling cynicism. The cost will be measured not just in how much more we will have to pay to meet our emissions targets, or what it will do to our politics to so conspicuously reward lies and lunacy in place of facts and reason.
The cost I am thinking of, rather, is the cost to sound economic policy generally, and to the ability of our politics to deal with economic issues in any kind of serious way. The debate over carbon pricing, after all, is not fundamentally a debate about carbon: it’s about pricing. Its opponents do not suggest, publicly at least, that climate change is not a problem, or that emissions do not need to be reduced. Rather, they have trained their guns on the whole idea of pricing as a solution.
Yet prices are all around us. Prices are the basic unit of a market economy. They are what tell us whether to buy or sell. They encode information on the relative scarcity or abundance of things, not just at the final point of sale, but at every stage of production. Without them, our economy would cease to function.
All of the complaints that have been made against carbon pricing could be made about prices in general. They make everything more expensive. They impose a greater burden on the poor than they do on the rich. They constrain our freedom.
Prices are indeed the greatest instrument for subordinating individual wants and desires to the needs of the collective ever devised. For they rely on a force more binding than any bureaucratic diktat: the force of other people’s wants and desires. The supply and demand that together set prices, and that are in turn settled by them, are the voices of our fellow citizens. Prices oblige us to ration our use of the resources available to society, to leave more for others, whether we want to or not.
Yet for the most part prices operate without controversy. We know that wherever prices are not allowed to do their job of balancing supply and demand, the result is lineups, shortages, rationing and politicized allocation of resources, with all of its inefficiency, unfairness and potential for conflict. We know that the best way to help the poor is not by suppressing prices, but by giving the poor more money to pay them. And by and large that is what we do.
I say “for the most part” and “by and large.” The most obvious exceptions are things that, like carbon, have not previously been priced, but which it is now proposed should be: things like, for example, road space.
The instinctive opposition to road tolls is a classic case of what Milton Friedman called the “tyranny of the status quo.” Roads, we think, have always been free (they haven’t, but never mind); therefore they must be free. People already pay to park on the roads, without complaint. But suggest that they should pay to move on them – pay, that is, in money, rather than in the time we now spend idling in traffic – and watch them riot.
But occasionally controversy erupts over the prices of things already priced, as we now see over rents, or credit card rates, or – lordy – grocery prices. The medieval doctrine of the “fair” price continues to haunt us. And wherever such sentiments exist, there will be demagogues ready to exploit them, peddling price controls as the answer.
Once upon a time, conservatives saw it as part of their mission to make the case for prices, rather than politics – markets, rather than government – as the solutions to economic problems. Conservatives were indeed the original proponents of carbon pricing. Had they stuck with it, they might have been able to use carbon pricing as a springboard to talk about using prices, and markets, more generally. If you like what the market can do for cleaning up the environment, can I interest you in what it can do for your schools, or your health care?
But instead the right abandoned it, for no reason other than because the left had taken it up. For a time, this seemed like no more than a missed opportunity. But the conservative “victory” over carbon pricing now looks like something much worse: a defeat for pricing, period. Assuming there are any conservatives who still care.